Economic Considerations Related to Alternative Agricultural Enterprises

1. Economic Considerations Related to Alternative Agricultural Enterprises Roger Sahs, OSU Extension Specialist April 1, 2008 National Women in Agriculture Educators Conference

2. Do you really need an alternative enterprise? • Does this activity really match your interests? • Is it technically feasible? Consider climate, soils, water availability, equipment, and labor. • Do you have unemployed resources or are you spread too thin? • What aspects of farming are you good at? Production details (fertilizer/pesticide appls, equipment, animal husbandry) or do you just watch others? • Are you good with innovative marketing? • Can you stand the production & price risks?

3. Marketing • Beware of promotions! • Plan for marketing before you plan for production. You can’t haul ripe blueberries to the local elevator! • Find a market need and find a way to satisfy that need. • Look for innovative ideas of your own. Compare notes with other producers. • Consider location from population base or main highways. • Salesmanship!

4. Education • Be realistic when evaluating your abilities. • Are your management levels sufficient? Do you know enough? Any experience? • Is information available? • Be an information seeker, look for reliable advice and guidance.

5. Sources of Information • Actual farm records • Books on production and industry • Grower organizations/cooperatives • Other operations • University specialists, educational materials, and meetings • Production websites • Search engines on the Internet • http://www.agrisk.umn.edu

6. Investment and Financing • Do your homework! • Prepare enterprise budgets and examine. • Is the operation economically feasible? • Can you get needed financing? • Work up a multi-year business plan. Educate lender on marketing/production. Be able to sell your creditworthiness.

7. Why Budget? • 1st step in developing marketing/business plan. • Evaluate options before you commit resources. • Identify production/price risks, potential financial impacts, and whether they can be managed. • Compare the profitability of two or more different systems of production. • Provide the documentation necessary to obtain/maintain creditworthiness. • Project cash flows.

8. OSU Enterprise Budget Software • Excel spreadsheet-based software • Consists of: • 24 crop/livestock commodities • 6 horticultural commodities • $20 each, 5 for $75, $250 entire set • Free data updates available • Available via CD or onlinehttp://www.agecon.okstate.edu/budgets

9. Why some people succeed year after year. • Know your costs and make sure your operation is as cost-effective as possible. • Keep accurate business records – financial and production – to see if you are headed in the right direction. • Understand the difference in cash flow vs. profit. • Don’t settle for “AVERAGE”. • Proceed with caution when trying new things or expanding. • Don’t go it alone! Never stop learning!

10. In summary…… • Some producers will make $$ from alternative agricultural enterprises. However….. • Alternative enterprises are not for everyone. • If you’re having problems now because: • You can’t get financing. • You’re not good at marketing. • You’re not good at recordkeeping. • You’re not good at getting things done at the right time. • Then be aware that these problems may be worse with alternative enterprises than with traditional ones.

11. Questions?? Roger Sahs OSU Extension Specialist 405/744-9836 roger.sahs@okstate.edu